Morning Market Update Nov 20

November 20th, 2012 by

Gold dipped slightly in overnight trading from the Monday’s COMEX close, and is seeing some early morning volatility between $1,731 and $1,735 in New York. Silver is still trading above $33/oz, but is unlikely to push the silver/gold ratio under 52.

One big story adding to the luster of gold is George Soros’ reversal in opinion on gold, as news hits that he took a large position in SPDR gold ETPs (trading under GLD), increasing his stake by 49% in the third quarter, to 1.32 million shares. This is still dwarfed by billionaire John Paulson’s stake in GLD, whose 21.8 million share represents 66 TONS of gold – $3.67 billion at market prices.

Soros’ change of heart seems to be thanks to the Fed’s pledge of unending quantitative easement, which will inevitably lead to currency debasement. Since ETPs trade like stocks, this will allow him the quick flexibility to convert his shares in GLD to purchase purchase distressed companies in the future while retaining his present-day buying power by converting dollars to gold today.

Touching on overseas developments, it seems that France’s recent credit downgrade had already been priced into the market, as European stocks didn’t seem as shaken by the news as some predicted. The EU and IMF are still wrangling over details of Greece’s next bailout, but sentiment is that something will be worked out. Oil is steadying over the Gaza Strip situation not escalating into a ground war just yet.

U.S. housing starts were stronger than expected, giving strength to the dollar (which will give a small downward pressure to gold.)

by David Peterson